Asiana's board votes in favor of delayed takeover by Korean Air

An Asiana Airlines flight attendant walks in front of the carrier's headquarters in Seoul, Thursday, when its board of directors decided to allow the sale of its cargo business to facilitate a takeover by Korean Air. Yonhap

Asiana Airlines’ board of directors came to a belated agreement to unload its cargo business and accept a string of other proposals by Korean Air to facilitate a takeover by the country's No. 1 carrier, which has faced considerable delays, according to company officials, Thursday.

The latest move has paved the way for Korean Air to obtain antitrust approval for its takeover plan from overseas authories, including the European Commission (EC), which raised concerns over curtailed competition.

Three out of the five members of Asiana's board voted in favor of the sale of the airline’s cargo unit to an unconfirmed third party. One of them voted against the plan, and the other abstained from voting. A board meeting was held on Monday to decide on the issue, but ended without any results due to internal discord.

Korean Air delivered a revised plan to the EC immediately after the Asiana board meeting. The nation’s flag carrier welcomed the latest decision by Asiana’s board, saying it will bring positive momentum for the remaining review process by overseas authorities.

The flag carrier expected the European authority to make a final decision by the end of January, 2024. Korean Air also has to obtain the approvals of the U.S. Department of Justice and Japan Fair Trade Commission to complete its takeover of Asiana.

Korean Air announced its plan to acquire the cash-strapped airline back in November of 2020. But the plan has since made slow progress due to opposition from foreign authorities. They argued that the merger is feared to restrict fair competition in the global aviation industry.

Asiana Airlines and Korean Air planes are seen in this file photo taken at Incheon International Airport. Yonhap

But the revised plan will alleviate the lingering concerns of not just Europe, but the U.S. and Japan, according to Korean Air.

“We will keep negotiating with authorities from the U.S. and Japan, and hope to finalize the screening procedure by early 2024,” a spokesman for Korean Air said.

Along with the sale of Asiana’s cargo unit, Korean Air also offered to give up the rights to four routes from Korea to Frankfurt, Paris, Rome and Barcelona.

Korean Air also pledged to guarantee employment succession while unloading Asiana’s cargo business.

Earlier, Asiana’s board failed to reach a consensus, as some members argued that the sale of the lucrative cargo unit may harm the carrier’s corporate value, which they said will also harm the interests of its shareholders.

But the airline is virtually on the brink of bankruptcy amid rising interest burden from creditors and the board ended up passing the agenda.

Industry officials argue that the upcoming decision by the U.S. authority will hold the key if the EC accepts the remedied measure from Korean Air.

“A major hurdle will be how to persuade the U.S.,” a Korean aviation industry source said. “It remains unclear what specific demand the authority is making before granting the approval for the high-stakes deal. A general consensus is that the Japanese authority will follow the upcoming decision by the U.S.”

Shares of Asiana Airlines closed down 8.68 percent at 10,210 won ($7.6) per share on Thursday. But Korean Air shares closed down only 0.25 percent at 20,150 won per share.